analysis of loans in indian bank and the satisfaction level of customers

ASIA PACIFIC INSTITUTE OF MANAGEMENT

ANALYSIS OF HOME LOAN

IN INDIAN BANK

A report submitted towards the partial fulfillment of the requirement of the two

year full time postgraduate diploma in management.

SUBMITTED BY: SHRADDHA SINGH

ROLL No.: 2K91A64

PROGRAMM: PGDM – GENERAL

SESSION: 2009 -11

AREA OF SUMMER TRAINING: FINANCE


3& 4 INDSTITUTIONAL AREA, JASOLA, NEW DELHI- 110025

INDIAN BANK ,MAYUR VIHAR


ACKNOWLEDGMENT

Enumerating and enlisting all the individual whose contributions went in to the making of the project is a very difficult task , because the work is never the work of an individual, it is more a combination of ideas, suggestions, reviews, contributions, work involving and complete plans

I offer my great sense of gratitude and thanks to

Mr. R.Manohar , Chief Manager of INDIAN BANK Mayur Vihar Branch who gave me a chance to work under him .I am obliged to him for encouraging me and for providing me valuable knowledge and content.

I am highly indebted to the Mr.V.Raman & the whole employee of Indian Bank for giving their valuable time and advice regarding this project.



I owe a special word of thanks to Ms. Anubha Gupta, colleged our programme director , who, provided me the great opportunity for working and preparing this project report.

I am also grateful to my father and all my friends without whose support this project could not have been completed.

Finally , I express my sincere thanks to all those who directly or indirectly helped me in the successful completion of this report.

INTRODUCTION OF THE ORGANISATION


TYPE- Public (BSE, NSE)

INDUSTRY- Banking


Indian Bank, established in 1907, is a major Indian Commercial Bank headquartered in Chennai (Madras), India. It has 22,000 employees, 1,657 branches and is one of the big public sector banks of India. It has overseas branches in Colombo, Sri Lanka, Singapore, and 229 correspondent banks in 69 countries. The Government of India nationalized the bank, along with 13 other major commercial banks, on 19 July 1969.

History

1907: Established on 15 August as part of the Swadeshi movement (Freedom Movement in India). Though not a Chettiar bank, some of the founders were Chettiars. The key figure was V. Krishnaswamy Iyer, a lawyer in Madras, who had made a name for himself defending claimants on Arbuthnot & Co, which had failed the previous year. In its early international expansion, IB would open branches in cities with important Chettiar populations.

1932: Indian Bank opened a branch in Colombo. 1935: IB opened a branch in Jaffna. 1939: IB closed the Jaffna branch. 1940: IB opened a branch in Rangoon (Yangon).


FOUNDED- 1907

HEADQUARTERS- Chennai (INDIA)

KEY PEOPLE – T.M. BASHIN (M.D. & Chairman)

REVENUE- 3895.99 Crores ~ $865m (2005-06)05-06)

EMPLOYEES- 22,000

ENT- RBI (Reserve Bank of India)

WEBSITE- http://www.indianbank.in/

http://en.wikipedia.org/wiki/Yangon

http://en.wikipedia.org/wiki/Jaffna

http://en.wikipedia.org/wiki/Colombo

http://en.wikipedia.org/wiki/Arbuthnot_&_Co

http://en.wikipedia.org/wiki/V._Krishnaswamy_Iyer

http://en.wikipedia.org/wiki/Chettiar

http://en.wikipedia.org/wiki/Government_of_India

http://en.wikipedia.org/wiki/Singapore

http://en.wikipedia.org/wiki/Sri_Lanka


http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Chennai

http://en.wikipedia.org/wiki/India

http://www.indianbank.in/

http://en.wikipedia.org/wiki/Reserve_Bank_of_India


1941: IB closed the Rangoon branch but opened branches in Singapore (where future branch manager KB Pisharody(1915-1998) started his career in the same year), and in Kuala Lumpur, Ipoh, and Penang. The rapid advance of the Japanese Army forced IB to close all its branches in Malaya and Singapore.

1942: IB closed the Colombo branch. Post-WWII: IB reopened its Malayan and Singapore branches. 1948: IB reopened its branch in Colombo. 1960s: IB acquired Mannargudi Bank (est. 1932) and Salem Bank (est. 1925). 1969: The Government of India nationalized 14 top banks, including Indian Bank. 1973: Indian Overseas Bank, Indian Bank and United Commercial Bank established United

Asian Bank Berhad in which IOB held 16.67% of the paid up capital, as a result of a new banking law in Malaysia that prohibited foreign government banks from operating in the country.

1978: IB became a technical adviser to P T Bank Rama in Indonesia, the result of the merger of P T Bank Masyarakat and P T Bank Ramayana.

1980: IB, Bank of Baroda, and Union Bank of India established IUB International Finance, a licensed deposit taker in Hong Kong. Each of the three banks took an equal share in the joint venture.

1987: IB acquired Bank of Tanjore (Bank of Thanjavur) in Tamil Nadu in a rescue. 1998: Bank of Baroda bought out its partners in IUB Intl. Fin. in Hong Kong. Apparently this

was a response to regulatory changes following Hong Kong’s reversion. IUB became Bank of Baroda (Hong Kong), a restricted license bank.

2007: IB celebrated its centenary year.

(i) Background of the problem : loans and advances is a wide topic . Indian Bank gives loans for many purposes. Bank gives the home loan but the things associated with the home loan, was not think by the bank. The problem was the analysation of home loan.

(ii) The rationale of the study : The ground for the study is seeking the each & every aspects of the home loaning.

(iii) The Scope : the theoretical and practical merely comes with each other. In this project there is circular criterions with the practical approach this will help in the knowledge of the home loan. With this project any one can get to to know about the application form, behaviours, applying process and many such things. Charts will help in the more clear knowledge of the topic.


http://en.wikipedia.org/wiki/Bank_of_Baroda

http://en.wikipedia.org/wiki/Tamil_Nadu

http://en.wikipedia.org/wiki/Thanjavur

http://en.wikipedia.org/wiki/Union_Bank_of_India

http://en.wikipedia.org/wiki/Bank_of_Baroda

http://en.wikipedia.org/wiki/Indonesia

http://en.wikipedia.org/wiki/Salem,_Tamil_Nadu

http://en.wikipedia.org/wiki/Mannargudi


http://en.wikipedia.org/wiki/Penang

http://en.wikipedia.org/wiki/Ipoh

http://en.wikipedia.org/wiki/Kuala_Lumpur

http://en.wikipedia.org/wiki/Kuala_Lumpur

http://en.wikipedia.org/wiki/Pisharody

http://en.wikipedia.org/wiki/Singapore


REVIEW OF LITERATURE

The law and the practice are the two different words, they seems theoretically same but they are much differ in application.

As example- above 20 lakhs loans comes in priority sector , but sometimes the employees take less than 20lakhs as in the priority sector.

In the INDIAN BANK the circulars criterians are differ in some cases in practice.Even the human behaves differently fir the same situation.

This is the very good project many things came in focus when I was working in the organisation that are very much different from the academic knowledge.

Some times the rules was strict but some times that rule becomes secondary. All the things happening in the working area also depends on the previous conditions, or our relations with the customers.

I worked on the home loan. Each and everything was not easy. Worked on the appraisal, application, eligibility, assets and liabilities statement, credit appraisal, eligibility criteria, customers satisfaction level in the bank, etc.



The things that are related with this topic are below-

Some areas or fields in a country depending on its economic condition or government interest are prioritized and are called priority sectors i.e industry, agriculture. these may further be sub divided. Banks are directed by the state bank of the country that loans must be given on reduced interest rates with discounts to promote these fields. Such lending is called priority sector lending .

Fixed rate- Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.

Floating rate :-This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up.

Home loans are usually accompanied by the following extra costs: a) Processing Charge: It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required by you cannot be less than the processing fee.

b) Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre-paid.

c) Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.

d) Miscellaneous Costs: It is quite possible that some lenders may levy a documentation or consultant charges.

e) Registration of mortgage deed.

Repayment period :- the time in which the borrower will repay the loan amount.



OBJECTIVE

The objective of the study is to analyse the home loan by each and every aspects. The study is about the criterions of Home Loan, with the satisfaction

level of the customers. Assess the Home Loan on different parameters is the objective of

this report. Through this report one can get to know about the satisfaction level

of customers of INDIAN BANK .



METHODOLOGY

For getting the knowledge on the Home Loan I discuss with the manager, cheif manager.

The circulars of INDIAN BANK gave me the best ground for my report.

I met with the customers of Home Loan, face to face. I get to understand the handling of the loaning customers.

I also took internet as a resource giver.

I prepared a questionnaire, in which Open-ended and Close- ended both type of questions are there. Some questions having the options.

I took the focus group interview with 5 customers of Indian Bank, in which the mentor was the manager of loan & advances.

I filled the questionnaire by the customer by face to face in their given address, in the bank.Some customers fill the questionnaire through E-mail. Some gave the telephonic answers.

I took help of Microsoft word , Microsoft Excel for making the project. I took the pie chart, bar chart for explaining the findings of the research.



OBSERVATIONS , ANALYSIS AND DISCUSSION

Meaning of Loans and Advances

The term ‘loan’ refers to the amount borrowed by one person fromanother. The amount is in the nature of loan and refers to the sum paidto the borrower. Thus. from the view point of borrower, it is ‘borrowing’and from the view point of bank, it is ‘lending’. Loan may be regardedas ‘credit’ granted where the money is disbursed and its recovery ismade on a later date. It is a debt for the borrower. While grantingloans, credit is given for a definite purpose and for a predeterminedperiod. Interest is charged on the loan at agreed rate and intervals ofpayment. ‘Advance’ on the other hand, is a ‘credit facility’ granted bythe bank. Banks grant advances largely for short-term purposes, suchas purchase of goods traded in and meeting other short-term tradingliabilities. There is a sense of debt in loan, whereas an advance is afacility being availed of by the borrower. However, like loans, advancesare also to be repaid. Thus a credit facility- repayable in instalmentsover a period is termed as loan while a credit facility repayable withinone year may be known as advances.



Utility of Loans and AdvancesLoans and advances granted by commercial banks are highly beneficialto individuals, firms, companies and industrial concerns. The growthand diversification of business activities are effected to a large extentthrough bank financing. Loans and advances granted by banks help inmeeting short-term and long term financial needs of business enterprises.We can discuss the role played by banks in the business world by wayof loans and advances as follows :-

(a) Loans and advances can be arranged from banks in keeping withthe flexibility in business operations. Traders, may borrow moneyfor day to day financial needs availing of the facility of cashcredit, bank overdraft and discounting of bills. The amount raisedas loan may be repaid within a short period to suit theconvenience of the borrower. Thus business may be run efficientlywith borrowed funds from banks for financing its working capitalrequirements.

(b) Loans and advances are utilized for making payment of currentliabilities, wage and salaries of employees, and also the taxliability of business.

(c) Loans and advances from banks are found to be ‘economical’ fortraders and businessmen, because banks charge a reasonable rateof interest on such loans/advances. For loans from money lenders,the rate of interest charged is very high. The interest charged bycommercial banks is regulated by the Reserve Bank of India.

(d) Banks generally do not interfere with the use, management andcontrol of the borrowed money. But it takes care to ensure thatthe money lent is used only for business purposes.

(e) Bank loans and advances are found to be convenient as far as itsrepayment is concerned. This facilitates planning for future andtimely repayment of loans. Otherwise business activities wouldhave come to a halt.

(f) Loans and advances by banks generally carry element of secrecywith it. Banks are duty-bound to maintain secrecy of theirtransactions with the customers. This enhances people’s faith inthe banking system.



Borrowing Rate and Lending Rate

People make their funds available to the banks by depositing their‘savings’ in various types of accounts. In other words, bank fundsmainly consist of deposits from the public, though banks may alsoborrow money from other institutions and the Reserve Bank of India.Banks, thus mobilises funds through its deposits. On public depositsthe banks pay interest at and the rate of interest vary according to thetype of deposit. The borrowing rate refers to the rate of interest paidby a bank on its deposits. The rates which the banks allow dependupon the nature of deposit account and the period for which the depositis made with the bank. No interest is generally paid on current accountdeposits. The rate is relatively lower on savings account deposits. Higherrates ranging from 6% to 12% per annum are paid on Fixed depositaccounts according to the period of deposit.

Banks also borrow from other institutions as well as from the ReserveBank of India. When the Reserve Bank of India lends money to



commercial banks, the rate of interest it charges for lending is knownas ‘Bank Rate’.

The rate at which commercial banks make funds available to people isknown as ‘Lending-rate’. The lending rates also vary depending uponthe nature of loans and advances. The rates also vary according to thepurpose in view. For example if the loan is sanctioned for the purposeof activities for the development of backward areas, the rate of interestis relatively lower as against loans and advances for commercial/businesspurposes. Similarly for smaller amounts of loan the rate of interest ishigher as compared to larger amounts. Again lending rates for consumerdurables, e.g. loans for purchase of two-wheelers, cars, refrigerators,etc. are relatively higher than for commercial borrowings.However, the Reserve Bank of India from time to time announceschanges in the interest-rate structure to regulate the lending of fundsby banks. Different rates of interest are prescribed for various categoriesof advances, such as advances to agriculture, small scale industries,road transport, etc. Graded rates of interest are prescribed for backwardareas. Lower rate is normally charged from agencies selling food-grainsat fixed price through Govt. approved outlets.Lastly, lower rate of interest is charged for loans granted to personsbelonging to ‘weaker sections of the society’.

Lending of Money

Commercial banks lend money in four different ways: (a) direct loans, (b) cash

credit, (c) overdraft, and (d) discounting of bills. These are briefly discussed below:

(I) LoansLoan is the amount borrowed from bank. The nature of borrowing is that the money is disbursed and recovery is made in instalments. While lending money by way of loan, credit is given for a definite purpose and for a pre-determined period. Depending upon the purpose and period of loan, each bank has its own procedure for granting loan. However the bank is at liberty to grant the loan



requested or refuse it depending upon its own cash position and lending policy. There are two types of loan available from banks :

(a) Demand loan, and(b) Term loan

(a) A Demand Loan is a loan which is repayable on demandby the bank. In other words, it is repayable at short-notice.The entire amount of demand loan is disbursed at onetime and the borrower has to pay interest on it.Theborrower can repay the loan either in lumpsum (one time)or as agreed with the bank. For example, if it is so agreed he amount of loan may be repaid in suitable instalments. Such loans are normally granted by banks against security. The security may include materials or goods in stock, shares of companies or any other asset. Demand loans are raised normally for working capital purposes, like purchase of raw materials, making payment of short-term liabilities.

(b) Term Loans : Medium and long term loans are called term loans. Term loans are granted for more than a year and repayment of such loans is spread over a longer period. The repayment is generally made in suitable instalmentsof a fixed amount. Term loan is required for the purpose of starting a newbusiness activity, renovation, modernization, expansion/ extension of existing units, purchase of plant andmachinery, purchase of land for setting up of a factory, construction of factory building or purchase of other immovable assets. These loans are generally secured against the mortgage of land, plant and machinery, building and the like.

(II) Cash creditCash credit is a flexible system of lending under which the borrower has the option to withdraw the funds as and when required and to the extent of his needs. Under this arrangement the banker specifies a limit of loan for the customer (known as cash credit limit) up to which the customer is allowed to draw.The cash credit limit is based on the borrower’s need and as agreed with the bank. Against the limit of cash credit, the borrower is permitted to withdraw as and when he needs money subject to the limit sanctioned.



It is normally sanctioned for a period of one year and secured by the security of some tangible assets or personal guarantee. If the account is running satisfactorily, the limit of cash credit may be renewed by the bank at the end of year. The interest is calculated and charged to the customer’s account.Cash credit, is one of the types of bank lending against security by way of pledge or /hypothetication of goods. ‘Pledge’ means bailment of goods as security for payment of debt. Its primary purpose is to put the goods pledged in the possession of the lender. It ensures recovery of loan in case of failure of the borrower to repay the borrowed amount. In ‘Hypothetication’, goods remain in the possession of the borrower, who binds himself under the agreement to give possession of goods to the banker whenever the banker requires him to do so. So hypothetication is a device to create a charge over the asset under circumstances in which transfer of possession is either inconvenient or impracticable.

(III) Overdraft Overdraft facility is more or less similar to ‘cash credit’ facility. Overdraft facility is the result of an agreement with the bank by which a current account holder is allowed to draw over and above the credit balance in his/her account. It is a short-period facility. This facility is made available to current account holders who operate their account through cheques. The customer is permitted to withdraw the amount of overdraft allowed as and when he/she needs it and to repay it through deposits in the account as and when it is convenient to him/her.Overdraft facility is generally granted by a bank on the basis of a written request by the customer. Sometimes the bank also insists on either a promissory note from the borrower or personal security of the borrower to ensure safety of amount withdrawn by the customer. The interest rate on overdraft is higher than is charged on loan. The following are some of the benefits of cash creditsand overdraft :-

(i) Cash credit and overdraft allow flexibility of borrowing,which depends upon the need of the borrower.(ii) There is no necessity of providing security anddocumentation again and again for borrowing funds.(iii) This mode of borrowing is simple and elastic and meetsthe short term financial needs of the business.

(IV) Discounting of BillsApart from sanctioning loans and advances, discounting of bills



of exchange by bank is another way of making funds availableto the customers. Bills of exchange are negotiable instrumentswhich enable debtors to discharge their obligations to thecreditors. Such Bills of exchange arise out of commercialtransactions both in inland trade and foreign trade. When theseller of goods has to realise his dues from the buyer at a distantplace immediately or after the lapse of the agreed period oftime, the bill of exchange facilitates this task with the help ofthe banking institution.Banks invest a good percentage of their funds in discountingbills of exchange. These bills may be payable on demand orafter a stated period.In discounting a bill, the bank pays the amount to the customerin advance, i.e. before the due date. For this purpose, the bankcharges discount on the bill at a specified rate. The bill sodiscounted , is retained by the bank till its due date and ispresented to the drawee on the date of maturity. In case the billis dishonoured on due date the amount due on bill together withinterest and other charges is debited by the bank to the customersaccount

Long-term and Short-term Loans

Commercial banks grant loans for different periods-long, short andmedium term for different purposes.

(1) Short-term loansShort term loans are granted by banks to meet the working capitalneeds of business. The working capital needs refer to financialneeds for such purposes as, purchase of raw materials, paymentof wages, electricity bill, taxes etc. Such loans are granted bybanks to its borrowers to be repaid within a short period of timenot exceeding 15 months.Short term loans are normally granted against the security oftangible assets like goods in stock, shares, debentures, etc. Therate of interest charged on short term loans ranges from 12% to18% p.a.

(2) Term Loans



Medium and long term loans are generally known as ‘term loans’.These loans are granted for more than 15 months. In case ofmedium term loan, the period ranges from 15 months to lessthan 5 years. Medium term loans are generally granted for heavyrepairs, expansion of existing units, modernisation/renovation etc.Such loans are sanctioned against the security of immovableassets. The normal rate of interest ranges between 12% to 18%depending upon the period, purpose, nature and amount of theloan. Though banks may grant long term loans, they avoidgranting loan for more than 5 years.

Nature and Security of Loans

To ensure the safety of funds lent, the first and most important factorconsidered by a bank is the capacity of borrowers to repay the amountof loan, The bank therefore, relies primarily on the character, capacityand financial soundness of the borrower. But the bank can hardly affordto take any risk in this regard and hence it also has the security oftangible assets owned by the borrower. In case the borrower fails torepay the loan, the bank can recover the amount by attaching theassets.It can sell the assets offered as security and realize the amount. Thusfrom the view point of security of loans, we can devide the loans intotwo categories: (a) secured, and (b) unsecured. Unsecured loans arethose loans which are not covered by the security of tangible assets.Such loans are granted to firms/institutions against the personal securityof the owner, manager or director. On the other hand, Secured loansare those which are granted against the security of tangible assets, likestock in trade and immovable property. Thus, while granting loan againstthe security of some assets, a charge is created over the assets of theborrower in favour of the bank. This enables the bank to recover thedues from the customer out of the sale proceeds of the assets in casethe borrower fails to repay the loan.



There are various types of securities which may be offered againstloans granted, but all of those are not acceptable to the banks. Thetypes of securities generally accepted by the bank are the following:

Tangible assets such as plant and machinery, motor-van, etc. Documents of title to goods, like Railway Receipt (R/R), Bills exchange, etc. Financial Securities (Shares and Debentures) Life-Insurance Policy Real estates (Land, building, etc). Fixed Deposit Receipt (FDR) Gold ornaments, Jewellery etc.

Procedure of granting Cash Credit, Overdraft andDiscounting Bill

Banks provide financial assistanceto its customers in the form of loans, advances, cash credit, overdraft and through the discounting of bills. The procedure of applying for and sanction of loans and advances differs from bank to bank. However, the steps which are generally to be taken in all cases are as follow:–

(I) Filling up of loan application formEach bank has separate loan application forms for differentcategories of borrowers. When you want to borrow money froma bank, you will have to fill up a loan application form availablewith the bank free of cost.The loan application form contains different columns to be filledin by the applicant. It includes all information required about theborrower, purpose of loan, nature of facility (cash-credit, overdraftetc) required, period of repayment, nature of security offered,and the financial status of the borrower. A running businesslimit may be required to furnish additional information in respectof :— assets and liabilities— profit and loss for the last 2 to 3 years.



— The names and addresses of three persons(which may include borrowers, suppliers, customers andbankers) for reference purposes.(ii) Submission of form along with relevant documentsThe loan application form duly filled in should be submitted tothe bank along with the relevant documents.

(iii) Sanctioning of loanThe bank scrutinizes the documents submitted and determinesthe credit worthiness of the applicant. If it is found to be feasible,the loan is sanctioned. If the loan is for Rs 5000 or less,normally the Branch Manager himself can take the decision andsanction the loan. In case the amount of loan is more than Rs5000, the application is considered at regional, zonal or headoffice level, depending on the amount of loan.

(iv) Executing the AgreementWhen the loan is sanctioned by the bank and the borrower isinformed about it, he will have to execute an agreement with thebank regarding terms and condition for the amount of loan raised.

(v) Arrangement of Security for LoanThe borrower will now arrange for security against the loan.These securities may be immovable properties, shares, debentures,fixed deposit receipts, and other documents, like, Kisan VikasPatra, National Savings Certificate, as per agreement.When the borrower completes all the formalities, he is allowedto get the amount of loan/advance/ over draft as sanctioned bythe bank. In case of ‘discounting of bills’, the bank credits theamount of bill to the customer’s account before the realizationof the bill and thus, makes available the fund. In case, the billis dishonored on due date, the amount due on the bill togetherwith interest and other charges are payable by the party whosebill is discounted.



CRITERIA FOR LOAN APPLICATION

Different companies have different criteria for loan application but there are some requirements, which remain the same even across the geographical boundaries. Credit Score is one such criterion and lenders use the score to determine whether they should give the loan to a person or not. Lenders will also carefully assess a borrower's merit by checking the track record for debt repayment. Because of the assessments that are required to be made by a lender before accepting a loan application, it is often difficult to quote a particular interest rate on the spot. The rates provided by lenders when you call them up are the standard or basic rates and the structure might change when you actually apply for the loan.

Lenders will primarily look at the following criteria while making your risk assessment:

o Status of Employment

o Your current income

o Your overall credit history

o Your previous and current repayment record, which is normally over the past 12 months

Joint borrowers



There are times when home loans have joint borrower's i.e two people apply for the same loan like husband and wife. In such a case the lenders will assess the above criteria for both the borrower's and weight will be given to the annual gross income of each of the borrower.

.



LARGE BORROWAL ACCOUNTS

OBJECTIVEThe key objective of monitoring of borrowal accounts is to ensure that the asset quality of each borrowal account and that of the credit portfolio as a whole is kept under “standard” category at all points of time .Monitoring also enables the branch managers /controlling authorities to identify /encash the growth opportunities available for the bank .

“Monitoring” activity commences immediately on receipt of a credit proposal for processing (both fresh and renewal):

a) Changes in constitution of the board of directors/ partnership firm, if any, should be carefully looked into, since withdrawal of capital/ unsecured loans brought in by outgoing partners/ directors, resignation of Technical Key Personnel may impact the performance of the borrower.

b) Project report should be submitted by the proposed borrower should address the issue of interest payable during construction period, cost of raw material needed during the period of trial run(as part of preoperative expenses)so that the regular working capital is not utilised during trial run period itself (as the product quality may not stabilise in the initial stage)

c) While assessing working capital , besides focussing on current asset current liability and net working capital , it should be ensured whether the borrower could achieve projected profit as detailed in the operating statement. Estimated increase in profit, as percentage to the actual should be studied in depth. Debt equity, current ratio, TOL/TNW and DSCR should confirm to our standard.



d) When term loan proposals are considered for financing expansion of capacity, it should be ensured that there will be adequate demand/ market for the product.

e) NOC from existing bank/ members of consortium for sanction of limits/ additional limits and creation of security should be obtained.

f) In respect of accounts to be taken over from other banks it should be ensured that the bench marks stipulated for take over, should be complied with.

Post monitoring should focus on:

a) Documentation complying with legal requirements , disbursements in accordance with the sanctioned terms and post disbursement follow-up.

b) Anticipation of problems in advance and initiating proactive measures to ensure that performance levels are as per projections, security cover is adequate and in tact and borrower is keeping up his commitments.



DOCUMENTATION1. Sanction should be communicated to the borrower and their

acknowledgement/ acceptance by the authorised person/s, to the terms/conditions stipulated be obtained and kept with other documents.

2. Advance should be released only after completion of documentation on all respects.

3. Documentation process should ensure compliance of the following :

i. Documents appropriate for category of borrower , nature of facility, nature of charge and securities involved.

ii. Stamping should be done before execution.

iii. Documentation should be duly filled in and be complete in all respects without any blanks, before execution.

iv. The executants should be duly empowered to execute the documents.

v. Property should be marked wherever necessary.

vi. The mode of execution as per documentation manual be adhered to.

vii. DPN executed should be free from any alteration

viii. Any insertion, addition alteration in other documents to be duly authenticated by all the executants.



ix. Each page of the document should be duly signed by all the executants.

x. Fresh/ supplementary documents should be obtained whenever there is an increase or decrease of limits sanctioned.

xi. Creation of charge with ROC for advance granted to Limited companies to be completed with in the prescribed time frame.

xii. Entries to be made in the document execution register, EM register (wherever necessery), advances register. DPN due date diary, insurance register, drawing power register.

xiii. It should be ensured that the documents obtained would take care of and cover all the terms and condition stipulated in the sancton ticket to avoid/ prevent the legal risks arising out of incomplete/ improper cover documents.



Pre-release audit

i. Pre-release audit is applicable for all advances with limitRs.50 lakhs and above

ii. Pre-release audit should cover compliance of pre release terms and condition and completeness in documentation.

iii. Any modification/ amendment/ waiver of pre release terms and conditions should be only with the concurrence of sanctioning authority.

iv. Pre-release audit should be carried out by inspector of branches of an officer conversant with credit portfolio or concurrent auditors, if provided with, and release should be with the approval of circle head.



Release – Disbursal of limit – Term Loan

1) Term loan would normally be disbursed only in stages in conformity with the terms of sanction, after completion of documentation and pre-release audit(wherever applicable)

2) Pre-disbursal inspection should be conducted before release of each stage.3) A record of such inspection observations / findings should be maintained

at the branch ,At every stage of release , branch should ensure/ verify that the end use of loan released earlier have been met

4) Disbursal towards machinery should be made after ensuring that civil construction is complete

5) Normally disbursals are made by directly remitting the amount to the suppliers of machinery, bonafide builders or contractors etc. It should be ensured that party as brought in required margin for each stage from his own source and that there is no diversionfrom working capital funds. In case of need , auditor’s certificate should be insisted.

6) Statement of progress report covering physical and financial progress should be obtained at periodical intervals and verified.

7) Wherever necessary, licences / approvals from government agencies/ debts/ pollution control boards,which are critical for project implementation, should have been obtained. Branch should scrutinise them and satisfy that project implementation confirm to these clearances.

8) Where more than one bank is involved in financing the project, the entire term loan should be tied up before any part our loan is disbursed.

9) Satisfactory utilisation of earlier disbursements should be ensured before considering further disbursements.

10) If there is a likelihood of cost over run, the overrun portion is to be tied up before disbursal of further sum.

11) In respect of project loans time schedule as PERT chart/CPM chart should be critically reviewed and it should be understood that any time overrun, if not made up, may result in a cost overrun also.



12) Adequate insurance cover should be taken during construction period and risk associated with construction should be covered under the insurance policy .

Disbursal of working capital

1) Raw material needed for trial production should not be include for arrival of drawing power.

2) Working capital advances should be released only after ensuring completion of project in all aspects including obtention of power connection (for new projects) etc. Of course necessary lead-time for procurement of raw material should be born in mind .

3) It should be ensured that the funds towards working capital is utilised only for acquiring raw material, stores etc, and for meeting the related the manufacturing costs.

4) At any point of time stipulated margin should be available.5) The release of working capital limits should have a bearing on the

operating capacity, level of sales etc, and any unwarranted inventory pile up will only result in an increase in the financial cost.

6) Very often diversion of funds, if any, made by the borrower is brought to light at a much later stage where the bank is not in a position to initiate appropriate legal action-civil or criminal. Therefore, whenever diversion is observed improper end use of funds is noticed , suh aspects should be thoroughly gone in to , analysed. Proper record of proof for such instances should be maintained for initiating action . amount diverted must be made good. In case further loans are to be considered , recurrence of such diversion should be avoided and adequate securities must be taken.



Monitoring of securities1. The securities should confirm to the terms of sanction. They should be

adequate in value, in good condition and readily realisable.2. It must be appreciated that the exact and detailed descriptions of

securities is necessary,so that our right/clam over the same could be established.

3. Location of the security must be specified4. The mortgaged land should confirm to all the legal requirements with

regard to the title etc. Valuation in respect of the mortgaged property should be obtained and kept with the records.

5. The value of the machinery as evidenced by purchase invoice should be taken on records. A list of machinery hypothecated must be obtained with detailed description of machinery. Copies of invoices etc should be held by the branch.

6. All the securities should be adequately ensured.7. All existing securities out of the securities stipulated should be inspected

before release of the facilities. Securities to be acquired out of fresh loan should be inspected immediately on purchase/installation. Both the additional securities and primary securities should be inspected at periodical intervals and record of observation should be maintained by the branch of future reference. This applies for both current and fixed assets.

8. Once the sanction is accorded and loan is disbursed after completion of documentation etc, as above, the process of monitoring needs to be more intensive.



HOME LOAN SCHEME FOR THE PUBLIC

APPLICABILITY

1. This scheme is applicable to individuals- salaried class, Businessmen, Professionals, and Self employed people, who have put in a minimum period of service/ experience of 3 years.

2. The applicant can have more than one residential house/ flat including the proposed one. The proposed house/ flat to be purchased out of Home loan should not have a living area of more than 6000 sq.ft (carpet area. Further, if there is an existing building while going for new construction, the area of existing building need not be reckoned / added up while arriving at the total area.

3. There is no restriction with regard to number of houses owned by an individual and home loan sanctioned should be for residential purpose/use, and not for commercial purpose.

4. In case the loan is availed for purchase of an existing house/ flat, the residual life of the building should be more than the actual repayment period plus not less than 10 years.

5. Second loan can be permitted for expansion / acquiring new property. The said sanction loan can be availed only at the branch where the first loan is serviced.

6. The borrower should not be more than 50 years of age at the time of availing the facility. As the loan should be repaid at the time of his/her retirement or attainment of 60 years of age whichever is earlier, the period of repayment will vary accordingly.

7. Age relaxation can be considered by circle head / focus branches on selective basis as under.



8. The upper age ceiling of 50 years can be extended to 55 years. In such case, the loan is to be adjusted on or before 60 years of age of the borrower .further at the time of the retirement, the drawing limit is to be reduced by at least 50% of the then DL/ outstanding in loan account (for accelerating repayment of the retirement benefits ) unless there is income to take care of scheduled EMI/ repayment thereafter.



QUANTUM OF LOAN

1. Loan is not available for purchase of land alone. Loan portion for acquiring plot can be up to 50% of the project cost but should result in construction.

2. 30 times monthly gross income or 48 months net monthly income whichever is higher. In computing the above, 60% of future rental income from the property to be purchased / constructed also can be included.

3. In case of self employed professionals, gross income net of tax before deducting depreciation may be considered while considered while computing the eligible amount.

4. The monthly income of borrower/ coborrower and spouse can be added together to compute the gross monthly income.

5. The income of spouse will be taken at 50% in case he/ she is employed in Private undertaking/ organisation and at 100% in case employed in government /large Corporate. However Circle Head can authorise to consider 100% of income of spouse on case to case basis in case of employment with reputed Private organisation. Sanctioning authority shall decide judiciously the income level to be recognised at 100% or 50% for the borrower or coborrower depending on the standing of the employer of the applicants.

6. Besides salary, other payment income by way of rent, interest on investment ,etc. May also be considered to reckon the loan limit.proof for all the above should be submitted (for income of self/ spouse, salary certificate from .IT/ Wealth tax return should be produced)

7. Circle head are permitted to sanction loan (including staff/ staff related loans) as under:Circle head in Scale IV - upto Rs. 25.00 lakhs Circle head in Scale V ,VI & VII - upto Rs.50.00 lakhs

8. Proposals above the limit delegated should be reffered to Head Office , Personal Banking Department.

9. Credit Sanctioning Authority at the level circle head and above may sanction he structured the loan products to any individual irrespective of the sanctioning level at head office for the “Associate/ Specific group” borrowal accounts to which the individual belongs,provided all the accounts of the group are in standard category. For sanction of multiple structured loan products the ceiling is to be adhered to in line with per borrower ceiling.



MarginMinimum 15% on the total cost. In case of purchase of ready built flat, the borrower should bring in full margin amount prior to release of limits by the blank. It shall be on the pro rata basis, where construction is involved.

Take home pay

40% take home pay on gross income should be maintained after the deduction of proposed EMI.

However, if the home take pay is more than Rs.20000 minimum take home pay of 40% on gross income need not be insisted.

Mode of charging interest/ servicing of EMI

Interest calculated on daily reducing balance with monthly rest. Branches should charge interest at discounted ROI on monthly rest, as per guidelines given in HO: CPGD Circular ADV/56/2002-2003 dated 31.07.2002.For EMI calculation , branches may refer to Ho: Credit Division Circular ADV/76/2001-02 DATED 06.11.2001. The guidelines as above shall be followed until amendments, if any, are made RBI, which will be communicated as and when put in place.

EMI to be serviced before 10th of next month.

Penal interst of 2% is to be levied for delayed payment beyond due date, for the overdue portion of EMI.



RATE OF INTEREST

Interest and repayment period with effect from1.8.2003 has been revised as under for fresh loans.

The revision of interest rate is applicable for all the existing accounts (other than fixed a/cs) prospectively, to all public, staff accounts, VRS optees having Home Loan and NRI Home Loan.

The revised rate shall be applied IRRESPECTIVE OF THE LOAN AMOUNT , in respect of both the existing and fresh loans (other than fixed rate a/cs). The earlier stipulation of of two different rates for limits below Rs.25.00 lakhs and above Rs.25.00 lakhs has removed.

Benefit of revised rate of interest (for floating rate a/cs only) ia made applicable to existing standard accounts with effects 1.3.2003. branches to obtain consent letter as per the format, before passing of interest benefit to existing floating a/c customers.

Period Rate (floating)w.e.f.01.02.2003Up to 5 years PTLR MINUS 4.00%

(PRESENTLY 8.00% p.a.)

5 years to 10 years PTLR MINUS 3.25%

(PRESENTLY 8.75% p.a.)10 years to 20 years PTLR MINUS 2.75%

(PRESENTLY 9.25% p.a.)(the change in the link ROI to PTLR is respective of the amount for all existing and fresh floating ROI accounts .)In view of the inters benefit , the EMI may be re-fixed based in the balance outstanding on the date of applying revised rate of interest

To determine the revised applicable rate of interest the original repayment tenor only will be reckoned not the residual period as of now.

1.Fixed Rate

The borrower can also opt for fixed rate of interest in which case, an additional rate of interest of 0.5% over the applicable floating rate of interest



on the date of sanction will be charged. This is applicable for fresh accounts only.

2. Switch over from fixed rate to floating rate

After the account has run from 3 years , from the fixed date of sanction, one time option can be exercised for converting fixed rate into floating rate . for the said Switch over a one time fee should be charged as service charges. If conversion of fixed rate into floating rate is sought after 5 years, from the date of sanction , the one time fee of 1% shall be waived by the branch managers.

The sanctioning authority shall permit for all such switch over.

Switch over from floating rate to fixed rate option is not contemplated at this stage.

PERIOD OF LOAN

Maximum repayment period is restricted to 20 years for Home Loan accounts / take over accounts (inclusive of holiday period). For take over accounts the period of loan should include the period it has run already in the institution.

REPAYMENT/ HOLIDAY PERIOD

1. Repayment of loan will commence from the month following the month in which last loan disbursement is availed.

2. For ready built house/ flat ready for occupation, depending on merits of each case, holiday period up to 6 months (maximum) may be considered by sanctioning authority.

3. Where construction is involved , the holiday period for construction and repayment should not exceed 18 months from the date of first disbursement/ commencement of construction whichever is earlier.

4. In case construction is delayed/ stopped in between,repayment shall start after 6 months from the date of last disbursements. Holiday period will not be extended beyond the permissible period.

5. If specifically permitted by the sanction authority, interest for the holiday period can be added with principal , and EMI can be calculated for thye repayment period of loan. To illustrate:



If loan is sanctioned for a period of 60 months with holiday period of 6 months , the interest for the holiday period to be added to the principal amount and EMI will be calculated for the remaining period of 54 months. In the above event, the balance in the account may go up beyond the sanction level due to the following:

Due to charging of interest on monthly rest during Holiday period. Payment of insurance premium to the debit of the account.

PREPAYMENT CLAUSE

No prepayment charges to be levied, in case of foreclosure of accounts . in case of bulk / accelerated prepayment , EMI can be re-fixed based on the balance outstanding of the remaining period, one cannot get any reduction in the applicable ROI contracted.

SPPORTIVE DOCUMENTARY EVIDENCE

1. Proof of employment and salary certificate for self and spouse(if employed)

2. Balance sheet in case of professionals, businessmen and self eployed persons should be obtained for 3 years.

3. IT/WT returns to be obtained for 3 years.4. In case of self-employed professionals, Pass book/ Current Account

Statement for the last 6 months should be obtained and verified.5. Proof of other income(rent, interest on investment)6. Agreement of Sale/ Sale Deed along with patta.7. If no sale deed, patta should be insisted and the proposals of such nature

can be considered only by Circle Heads on Selective basis.8. EC for 13 years showing encumbrance.9. Approved building plan10.Parent document for 30 years11.Parent document should be insisted in respect of land and if it does not

form part of larger extent. In case of land and if it does not form part of larger extent, availability of original parent document to be verified and certified copied to be taken.

12.Patta (NOC from Housing society/Housing board etc. Wherever applicable)13.In case of flats, applicant to submit certified copy of parent document duly

certified by the registrar of assurance. In case of flats purchased from Societies/ Builders promoters, usually only xerox copies may be available for parent documents. Hence the same can be obtained duly certified by



lawyer of the Building Promoter who has scrtinosed the document. Non availability of patta /parent document be referred to Legal Advisor for views and to Circle Head for relaxation.

14.The branch while financing the flats should obtain an undertaking letter from the builders to the effect that they had not violated any norms or guidelines issued by statutory authorities/ Government restrictions/ guidelines.

15.Valuation Report from Panel Engineer /legal opinion.16.At the time of submission of application, copy of valuation report/ legal

opinion should be submitted by the borrower. Legal fees, and engineer’s valuation charges can be part of Home Loan. Engineer valuation report need not be insisted if the flat is acquired for Housing Board, State Development Authority /Bodies /Local Improvement trust.

17.Declaration as to whether relative is working in the bank.18.Proof of having brought margin.



Availment of loan

Sanction of Home Loan to the applicants at the place of work and EM of property at a place other than the place of lending can be permitted subject to the following conditions:-

For creation of EM in a state other than the state where the property is located, borrower should deposit the necessary stamp duty as would have been applicable for the loan amount, had the mortgage been created in the centre where the property is situated (e.g. Property located at Mumbai and EM created at Chennai)

Branches, in case of fresh borrowing or in case of take over where valuation/ and legal opinion are not available, should seek the help of branches at the place where the property is situated to obtain legal opinion/ valuation as the case may be as also the site visit report before sanction of loan.

SECURITY: EM of the property to be taken over as security as per extent guidelines.

In case of employees of Government departments/Public Sector Units (PSUs), who have availed Housing laon from their employer against mortgage of the property by way of first charge, as against exclusive charge on the property , second charge can be approved by controlling authorities on selective basis subject to fulfil margin requirements.

In such cases, a letter to be obtained from the government department/ PSU according permission to avail a loan from Indian bank on Second Charge.

PERSONAL GUARANTEE



1. Personal guarantee of spouse is compulsory where his / her income is taken in to account for determining the loan eligibility.

2. In case of joint ownership, guarantee of the other joint owners should be insisted along with the guarantee of the spouse.

3. If the plot is owned by the wife irrespective of whether she is employed or not, loan can be sanctioned to spouse (Husband) depending uponhis income as well as his wife’s income, in which case the loan should be in joint names. Also in such cases transfer of land in the name of the husband need not be insisted upon.

4. In case of joint borrowing by any two or more close blood relatives i.e. father, mother, son and daughter, loan can be allowed provided the legal heirs of the owner of the land give an undertaking by way of an affidavit that they do not have any objection to the borrowing arrangements against the mortgage of the property.

5. Staff members, their spouse and relative can also avail fresh /shift from other institutions. In case of loan availed by staff/ spouse the guarantee of spouse / staff is compulsory.

EM CHARGES EXEMPTIONIn respect of Home Loan with a limit of Rs.25 lakhs and above, service charges for creation of EM by deposit of title deeds is waived.



OTHER GUIDELINES:

1 Circle head can designate focus branches. Home Loan can also be allowed by corporate and credit intensive branches, subject to the condition that the attention of CMO’s are not diverted for the work relating to personal banking business and to utilise other officers from credit department for considering proposals received under Structured Loan Scheme

2 The home loan scheme should be extended only by branches in Metropolition / urban centers. Focus branches already identified / non focus branches shall exercise the powers as delegated earlier for sanction of loan.

a. Semi urban branches should obtain prior permission / clearance from Circle Head before considering proposals for home loan. Circle office have to look in to the scope for Home Loans as also size of the loan in the semi urban areas for permitting the Branches which have sufficient infrastructure to handle home loan proposals. Moreover, such semi urban branches can exercise the powers delegated for nonfocus branches only as per HO circular ADV. 74/2000-01 dated 15.08.2000. semi urban and rural branches can also be identified as focus branch by Circle Head based on the potentials / infrastructure available, subject to the following conditions.

b. Semi urban/ Rural Branch to lend only if the property situated in the area of their operation.

c. The above restrictions for lending with i n the area of operation shall not apply to take over of account from M/s Ind Bank Housing Limited.

d. Metro/ Urban centres considering the proposals for properties situated in Semi urban/ Rural should divert the business to nearby branch of our bank for effective follow up and monitoring.

3 Incentive for borrowers: For borrowers with good track record of prompt repayment for at least 4 years, an incentive in the form of additional loan of 10 % of the original home loan amount (not exceeding Rs. 1 lakh) shall be considered towards renovation/ repairs as per the norms as applicable under repairs/ renovation.

4 In case of proposals for purchase of flats where construction is yet to begin/ under construction, the sanction of such proposals should be reffered to Circle Head, if the undivided land is not yet registered in favour of the borrower.

5 Circle office should will look in to the competence and capability of the builder to complete the project in time. Moreover the borrower’s margin should be paid as initial instalment to the builder and Bank loan should be released in stages there after based on the progress of construction.



6 Loan for purchase of land and construction is to be released in stages only as under. Branch manager should inspect and satisfy himself about utilisation of loan amount besides obtaining certificate from our approved engineer before release of loan at every stage.

7 Inspection of the property should be made before and after sanction for purchase of ready build flat/ house.

8 Classification of advance as NPA: If the excess overdrawing limit i.e. overdue exceeds or equal to Six EMI, then only the account should be classified as NPA. Branch should closely follow up with the borrowers to avoid this situation.

9 Servicing of interest during holiday period: Interest debited during the Holiday Period will be treated as part of principal if specifically permitted in the sanction ticket as EMI shall be computed based on the balance at the end of the holiday period.

10 Computation of drawing limit: The drawing limit for the purpose of home loan is to be arrived at as under .

Loan Amount – (EMI x No of instalments payable) + interest debited so far11 Overdues in Home Loan Scheme:

Overdues in Home Loan Scheme should not exceed 10% of demand and wherever the same exceed the stipulated level, recovery action should be initiated by contacting the borrower then and there.Branch should also maintain DCB register for all personal loan products aas applicable to Agricultural advances and overdues should be computed as under.

12 Demand: The demand during the period of reporting is the overdue amount as at the beginning of the period plus the EMI fallen due during the period.

13 Collection: The collection is the amount actually received during the period.

14 Overdue: The shortfall in recovery being overdue (Demand - collection) Since the bank has targeted for containing the accretion of fresh NPA to less than 2%, we cannot afford to have overdue accounts and at the same same continue to lend further. However taking a practical approach whereby the overdues may not be entirely avoidable, it has been decided that any branch having overdues more than 0.40% against Balance outstanding under Home Loan Scheme should approach their Circle Head for further lending under this scheme.



PROCESSING FEEProcessing fees of 0.50% of the loan amount applied for is payable along with the application form (non refundable). On sanction of loan, Administrative fees of 0.50% is payable at the time of acceptance.

RESPONSE TIMEApplications received with full details/ necessary documents should be processed and sanctioned communicated within the stipulated response time of 15 days. Any deficiency in the application should be immediately brought to the knowledge of the applicant to avoid any adverse criticism/ comments on the service/ efficiency of bank.

INSURANCE FOR PROPERTYProperty to be ensured with Bank Clause at Borrower’s Cost. Our bank has been negotiating with HDFC SLI(optional) and also with SBI Life Insurance Company Limited(optional) for insurance of life of Home Loan Borrowers on certain terms and the same will be communicated to all circles shortly.

PRECLOSURE CHARGESFor fresh sanctions to be made. Preclosure charges of 2% on the drawing limit to be levied.

OTHERAll other terms and conditions and reporting system shall continue as under as per the existing guidelines.Branch managers should report their sanctions to circle head on fortnightly basis.Circle Head should report their sanctions to HO PBD, monthly.



HOME LOAN FOR REPAIRS AND RENOVATION

PURPOSE:-

Under this category borrowers can avail loan for repairs, water-proofing, plumbing, compound wall, digging of well/ tube well, flooring/tiling. Additions like Built-in CupBoards/ Shelves, internal repairs including replacing doors/ windows. In addition to the above the borrower can avail loan for purchase of household furniture including space saving furniture (kitchen racks, cupboards etc.) which will form part of Home Improvement Loan (apart from automatic Loan)

APPLICANT:-

The borrower should be owner of the property so as to create a valid equitable mortgage.

QUANTUM OF LOAN/ MARGIN:-

Maximum loan Rs 5 lakh. Margin :30%

PERIOD OF LOAN:-

The loan should be repaid with in a maximum period of 10 years.

In cases where the loan is taken for purchase of house / flat, repayment period for loans taken for repairs/ renovation should be fixed in such a way, it coincides wth the repayment period of home loan, but not exceeding 10 years.

RATE OF INTEREST:-

Up to5 years : PTLR minus 4.00% (presently 8.00% p.a.)

Above5 years up to 10 years : PTLR minus 3.25% (presently 8.75% p.a.)

To determine the revised applicable rate of interest with effect from 1.3.20003, for existing accounts, the original contracted repayment tenor only be reckoned, not the residual period as of now.

PROCESSING FEE :-

Processing Fee of 0.50%(along with the application) and administrative fee of 0.50% (at the time of sanction) will be collected, which is non-refundable. Minimum amount of processing / administrative charges shall be Rs.1000. Upto 30.09.03, processing /administrative fee is waived.



DOCUMENTS TO BE SUBMITTED :-

Approved building plan, estimate , Nil Encumbrance certificate for the last 13 years and proof of having spent the margin amount.

The estimate and margin money spent will be subject to being certified by Bank’s Approved Engineer.

OTHER TERMS :-

Automatic loan of R 1 lakh for reapairs is available for Home Loan Borrowers as per the Scheme, as an incentive for prompt repayment in the account has run satisfactorily for a period of 4 years. This is apart from the Loan Eligibility up to Rs 5 lakhs for repair /renovation. All other relevant terms as applicable for purchase / construction of house/ flat shall apply for loans taken for repairs and renovations also.



EXTENSION OF HOME LOAN TO STAFF MEMBERS

For officers:- only those officers who have completed 5 years of continuous service in the bank shall be eligible for loan.

For award staff:- only those staff members who have completed 4 years of continuous service shall be eligible for loan. The upper age limit for availing the loan will be 50 years. Any relaxation may be considered depending upon the repayment capacity of the staff by Circle Head with a condition that at the time of retirement at least 50% of the outstanding in loan account is to be adjusted out of the retirement benefits provided there is income to take care of repayment thereafter. In all other cases, the repayment should be restricted to the age of retirement.

QUANTUM OF LOAN:-

30 times of the gross salary or 48 times of net salary whichever is higher subject to a maximum of Rs.25 lakh. The staff can have more than one residential house/ flat including the proposed one. The area of the proposed house / flat should not have a living area of more than 6000 sq ft(carpet area).

(A) Quantum of SHL and Home Loan: If the proposal is for construction/ acquisition of ready built house/purchase of plot and construction thereon, home loan can be considered for the said purpose as additional facility. SHL limits sanctioned for acquiring the same house/ flat, should be deducted from the eligible loan amount. The loan can be considered subject to complying of 40% take home pay.

(B)If the proposal is for the purchase of separate property other than SHL property, the eligible limit as arrived as based on 30 times of gross salary of 48 times of net salary whichever is higher may be considered by Circle Head for the eligible staff irrespective of their scale / position in our bank.

(C) Loan can be considered for additional construction/ repairs /improvements up to a maximum of Rs.5 lakhs excluding balance outstanding in SHL, loan against title deeds to staff members, supplementary loan from IBHL and other housing loans availed from Financial institutions.

(D) In determining the eligibility, income of spouse (100% if employed in government/ large corporate & 50% otherwise) and other regular income by way of rent, interest on investment etc.(subject to production of proof/ IT returns) will be included. However Circle Head can consider 100% of income of spouse on case of reputed private organisation.



RATE OF INTEREST :-

Irrespective of the loan amount as applicable to pubic. The condition as applicable for public shall apply to staff accounts also in repect of Fixed Rate option, conversion of fixed rate in to floating rate and also application of revised rates to existing accounts.

INSURANCE :-

As applicable to public. Premium has to be paid by the borrower immedietly, apart from EMI.

SANCTIONING AUTHORITY:-

Circle heads can sanction to staff members working under their control. For employees working in Central Office / Inspection Centres/ Training centres/ subsidiaries and their spouse, DGM (PBD) is the sanctioning authority.

SERVICING THE A/C:-

In case the staff members the loan account should be maintained at the branch where he is working irrespective of the location of the property. However in case the loan is availed by spouse of staff members, who is not an employee of our bank, the loan account will be maintained at the branch where the loan was sanctioned.

All other terms and conditions / appraisal norms / documentation etc as applicable to public.



HOME LOAN TO NRI

TARGET :-

NRIs gainfully employed and with a residual contract period of service for at least three more years to run. NRI professionals with a regular monthly income. Branch should appraise the earning potential of the prospective borrower to ensure timely repayment of loan.

PURPOSE :-

Construction of new house / flats, purchase of old house, flat additions / alteration to an existing house and repairs / renovation.

QUANTUM OF LOAN :-

Up to 30 times of gross monthly earnings of the NRI, with a maximum of Rs. 25 lakhs under scheme. Income of spouse shall also be included at the commercial judgement of the sanctioning authority, for arriving at eligible loan amount. Proposals falling beyond Rs.25 lakhs should be referred to Circle Head.

MARGIN :-

15% of cost can be brought in either by way of fresh inward remittances / funds from non resident accounts/ local funds. Value of own land shall be reckoned for the purpose of margin.

INTEREST RATE :-

Floating rate only. As per home loan for resident Indians.

REPAYMENT :-

Maximum 15 years. Repaying capacity as per appraisal, but not exceeding 180 EMI. As loans are sanctioned under floating rate of interest, whenever the PTLR undergoes change, the repayment under EMI has to



reworked for the remaining period. The holiday period interest also shall be reckoned along with principal to arrive at EMI amount. The repayment may be by way of remittance from abroad or from other domestic sources including rental income from the property etc.

SECURITY :-

1. EM of property purchased 2. At the discretion of the sanctioning authority, third party

guarantee/ additional securities may be obtained.3. If income of the spouse is included for the purpose of arrival of

eligible loan amount then guarantee of spouse should be obtained.

4. No second charge or extension of charge is permitted.

OTHER CONDITIONS :-

1. For loan amounts up to Rs.3.50 lakhs minimum monthly income is US$ 250 or its equivalent.

2. For loa amount above Rs.3.50 lakhs up to Rs.5 lakhs minimum monthly income is US$500 or equivalent.

3. For loan amounts above Rs.5 lakhs and up to Rs.25 lakhs, minimum monthly income is US$ 900 or its equivalent.

4. Proof of employment including remaining period of service, ban statement/ proof of income for professionals to be obtained.

5. The house or flat should not be older than 15 years and the minimum residual life should be 25 years.

6. Age group of borrower 21-507. If construction is deferred/delayed in between for some

reason, repayment should however commence from the scheduled date with any deferment.

8. Insurance of property for full value to be in force during the pendency of the loan.



HOME LOAN SCHEME

DOCUMENTATION AND SECURITY ASPECTS

EM is properly created with all the listed out documents. Legal opinion certifying clear and marketable title to the property is

obtained. Lay-out and the Plan of the building is approved by the appropriate

authorities. Legal opinion and valuation certificate/ estimate are from our approved

Lawyer/ Engineer at the place where the property is located. Adhesive stamp is affixed on the document and cancelled by the branch

manager/ stamp office/ treasury Text of the document is typed on non judicial Stamp paper of requisite

value, completed in all respects and signed by the customer. If EM is created at a place other than where the property is located, stamp

duty is paid as would be applicable for the loan amount had the mortgage been created in the centre where the property is situated.

30 days after creation of EM, one more encumbrance certificate is obtained. In respect of accounts taken over from other banks/ institutions, the

original documents are obtained with in reasonable time (maximum 15 days) and mortgage formalities are completed. Acknowledgement received from the bank/ institution be kept with the documents.

Inspection of the properties done meticulously both prior to the disbursement period and record be maintained. Branch manager should satisfy himself/ herself about the actual ownership and occupancy of the property taken as security by making property enquiries and keep a record of the same.



HOME LOAN –Do’s AND Don’ts

DO’s

1. About the borrower:- Address proof to be obtained and verified (like driving license,

passport- photo produced with the application can be compared with these documents)

A formal visit to the residence/ house as per the address furnished by him/ her.

Address of native place/ birth place to be ascertained and recorded, which will help at the time of suit filling / EP filling.

Ensure account is opened with our bank before processing applications / issuing sanction ticket.

Whether he/ she is earning regular income and is in permanent employment or well established in the business / profession.

Status of the organisation where the applicant is working and its reputation in the market.

Status of the organisation where the applicant is working and its reputation in the market.

Reliability / authenticity of salary certificate and verification as to whether all deductions have been shown.

In case salary disbursement authority and the applicant are one and the same, salary certificate to be signed by his higher authority.

Repayment capacity based on other market borrowings Size of the family to be obtained and verified If existing customer, our past experience / his track record.

2. Documents:- Please verify approved building plan , clearance from Town Planning

Department or concerned competent authority Estimated value by our approved engineer and the same to be

compared with prevailing market rates also. EC for 13 years. One month after disbursal. Fresh EC to be

obtained.EC to applied by our bank officials or by authorised persons only. Not to be rely upon the EC produced by the applicant

Parent document and patta to be verified In cash of flats, original documens for the undivided share of land

and copy of the entire land documents where the property is being developed is to be obtained.



In places where undivided land share is not available nothing in the society record is a must. Society details should be verified.

House tax/ water tax receipts and electricity bills to be verified, if existing property is purchases by the applicant.

For obtaining legal opinion, original documents are to be handed over to the approved lawyer by our bank officials only and not through the applicant whether legal opinion speaks of clear and valid title to be studied.

3. Income :- Salary slip for last months to be verified. Please cross check the annual income derived from salary slip by

comparing it with Form 16/IT return for the past 3 years. In a particular year, some arrears might have been received and the annual income shown in the application may not be the some for all years.

In case of self employed/ professional income level should not be accepted merely based on a certificate from a Chartered accountant/ SARAL form field for the current years. Income earned during the past 3 years to be verified from books, or from bank accounts or from actual tax paid.

PASS BOOK ENTRIES:- please verify passbook / statement of account of saving bank account for the past 6 months,the average balance in the account and entries for returned of cheques, if any, will give better idea about the financial soundness of the borrower.

EMPLOYER RISK:- please keep abreast of industry trend. update information will to exercise caution, if an applicant employed in a high risk industry approaches for loan.

RENTAL INCOME:- the rental income shown in the application should be compared with the market rates in the locality. Lease agreement to be verified.

4. Takeover of loan accounts :-Only standard assets should be taken over. In cash of take over from co-operative bank/ co-operative society, it should be verified whether the loan was for house construction or mortgage. Statements of loan account for the last 24 months should be obtained/ verified as to whether instalments are paid regularly.

5. Age of the building :-Residual life period of the proposed flat / house to be purchased should be minimum of 10 years more than the repayment period.

6. Number of houses :-Applicant can have more than one residential house including the proposed one.



7. Builder :-It should be verified that the builder of the property is a reputed one in the market. Whether the building is as per the plans approved by the competent authority. Compliance of the local laws/ regulations.

8. Inspection :- Branch manager / assistant branch manager/loans officer should

visit the property while processing the application, to find out the details of ownership, area, approximate value age of the building etc.

For verification of asset . a standard format may be formulated so that the visiting / inspecting official will ensure all items are verified and recorded.

Loan amont should be released only after inspection. After loan disbursement, another inspection should be carried out the recorded, for having inspected the flat / house. A verification of the society’s record for having noted the bank’s lien should be done.

On no account full amount the disbursement for an incomplete construction.

While Asset verification /inspection is done prior to the release of credit, discrete market enquiries to be made with the neighbours and in habitants about the ownership and other reliable information about the property.

9. Mode of payment :- Payment should be made directly to the seller after verifying

advances paid if any. The details of our BPO/ DD may be incorporated in the self deed to

be registered. If it a take over from the bank/ institutions. Payment to be made

directly to the institution and the acknowledgement should be kept with the documents till such time the original documents received from them.

In cash of building under construction pro-rata payment should be release after getting the borrowers share. Cheque/ pay under should be issued , favouring the builder.



CASE

HOME LOAN

(For Purchase of flat)

Laxmi Narayan apply for home loan of Rs. 15,00,000/- for purchase of a flat.

Target group

Self employed

Purpose Purchase of flat under construction

Eligible amount

15 lakhs

Age of the borrower

33 years

Repayment 180 months (15years)

Security Flat in Ghaziabad (U.P.) 21,75,000

Margin 15%

Interest rate 7.5%

Documents to be obtained

1. Application in the bank’s regular format.2. Proof of residence.3. Age proof for applicant and co applicant.4. Latest salary certificate,if employed.5. B/S for the last 3 years in case of business professional or

self employed person.6. Income tax assessment order /return / from 16 years for

the last 3 years.7. Proof of other income (rental , lease agreement



Declaration for proposed rent) etc.8. Passport size photograph -29. Sale agreement / sale deed (original)10.Copy of the approved layout/ Building plan.11.Any other document requested by the bank at the time of

the processing of the application.Sanctioning authority

RBS is the sanctioning authority.



LOAN APPRAISALCost of the project = 20 lakhs

Less margin (15%) = 3 lakhs

Net project cost = 17 lakhs

(a) Gross monthly income:Gross income of the applicant= Rs. 12523Add: income of spouse = Rs.8827Add:60% of future rental = Rs. 6000 Total = Rs. 27350

(b) Net monthly income:Net income of the applicant= Rs. 12335Add: income of spouse = Rs. 8827Add:60% of future rental = Rs. 6000 Total = Rs. 27162

(c) 36 times of (a) = Rs. 984600(d) 60 times of (b) = Rs.1629720

Loan Amount (c) or (d) whichever is higher =Rs. 1629720

Eligible loan amount = 15 lakhs

A. EMI for eligible loan amount for a repayment period of 15 years = Rs.13689B. Net monthly income (-) 40% of total monthly gross income = Rs. 16222

B should be equal or more than A.



Documents to be Submitted

Application in the bank’s regular format. Proof of residence. Age proof for applicant and coapplicant. Latest salary certificate,if employed. B/S for the last three years. Income tax assessment order/ return/ from 16 for the last

3years. Proof of other income (Rental lease , agreement, declaration

for proposed rent etc. Passport size photograph-two Sale agreement / sale deed(original) Copy of the approved layout/ building plan Any other document registered by the bank at the time of

processing the application.



CUSTOMER SATISFACTION LEVEL

INDIAN BANK

1. Purpose of taking the loan

I. Home Purchase LoanII. Home Repair and

Renovation LoanIII. Home Construction LoanIV. Home Extension LoanV. Home Conversion Loan

VI. Land Purchase Loan VII. Bridge Loan

VIII. Balance transfer LoanIX. Refinance Loan X. Stamp Duty Loan

XI. Loan's o NRI's

2. Loan amount ...............................................................(in Rs.)3. Repayment period ........................................................(in months)4. EMI ...............................(in Rs.)5. Installments........................................6. Bank sanctions the loan

i. At the given timeii. Some times after

7. The rate of interest is .................8. The guidelines gave by bank manager for the loan ,was

i. Satisfactory ii. Not enough



9. Pre loaning behaviouri. Very good

ii. Goodiii. Bad iv. Very bad

10.Post loaning behaviouri. Very good

ii. Goodiii. Bad iv. Very bad

11.Disbursement of the loan wasi. In the demanded period

ii. Sometimes there was fluctuations in the disbursementiii. Never in the time

12.The amount of loan wasi. As given in the sanction ticket

ii. There was some difference in the amount13.Did you went for seeking loan procedure in any other bank

i. No ii. Yes

14.If yes, then which bank......................................15.How much you are satisfied with the other bank

i. Highly satisfied ii. Equally satisfied

iii. Low satisfied16.Any suggestion for the bank, regarding behaviour of the

employees .........................................................................................................................................................................................................................................

THANKS

Name-...........................................................



Age- ................

TYPE OF HOME LOAN NO. OF CUSTOMERSHome Purchase Loan 19Home Repair and Renovation Loan 12Home Construction Loan 20Home Extension Loan 3 Home Conversion Loan 6Land Purchase Loan 8Bridge Loan 2Balance transfer Loan 0Refinance Loan 3Stamp Duty Loan 2Loan's to NRI's 1

Home Repair and Renovation LoanHome Construction LoanHome Extension Loan Home Conversion LoanLand Purchase Loan Bridge LoanBalance transfer LoanRefinance Loan Stamp Duty LoanLoan's to NRI's



SANCTIONING OF THE LOAN Column1at the given disbursal date 74after the given disbursal date 2

after the given disbursal date0

0.20.40.60.8

11.21.41.61.8

2

74

THE GUIDELINES Column1Satisfactory 60not satisfactory 14

satisfactory

not satisfactory

0 10 20 30 40 50 60 70

Series1



PRE LOANING BEHAVIOUR Column1Very Good 40Good 28bad 6Very bad 2

GoodbadVery bad



POST LOANING BEHAVIOUR Column1Very Good 45Good 20bad 1Very bad 0

GoodbadVery bad



DISBURSEMENT OF THE LOAN Column1in the demanded period 49fluctuations in the disbursement 25never in the time 2

fluctuations in the disbursementnever in the time



AMOUNT OF LOAN Column1As given in the sanction ticket 70some differencre in the sanction amount 6

Column1

As given in the sanction ticketsome differencre in the sanc-tion amount



seeking the procedure for other bankColumn1 Column2

yes 15no 61

yesno



Satisfaction with the other bankColumn1 Column2

highly 2equally 8low 66

highlyequallylow



SUMMARY

The report is all about the analysis of the Home Loan. There is all the criterions from the meeting of the customer at the first time till the disbursal of the loan and the repayment of the loan with the behaviour of the employees towards the customer and the satisfaction level of the customer. There is much more about the meaning of the loans and advances and the type with all the criterions.

CONCLUSION

The home loan , more than the 85% customers are satisfied with the Indian Bank.The loans are not very easy but not very tough. The managers gives the proper guidelines to

the customers and the managers deal them with full enthusiasm and patience, at the time of discussion. The employees are good towards the customers and give them the full support of their. Sometime there is deviation in the saying and working but the percentage of this is very low. Only less than 7% customers went for seeking the procedure of the other bank , but they came back and took the loan from the bank. The behaviour of the bank is very good.

RECOMMENDATION

In the bank there is good level of satisfaction of the customer . but some times the problem created is regarding the telephonic conversation, due to the less employees the attending of the customers are less. They have to recruit the new employees and give the training to them regarding the customer behaviour. Some times there is deviation in the criterions , law and the practice is different, they have to fill this gap. This will lead in the less satisfaction of the customers.



EXECUTIVE SUMMARY

First and the foremost thing is the Indian bank about the bank , History

In the itntroduction of the project there is Background of the problem, the rationale of the study.& the scope.

After this there is review of literatutre. In the report there is objective and the how the project have been proceed means , methodology,then observations , analysis and diccussion. In the analysis and discussion there is the full knowledge about the loans and advances , meaning of loans and advances ,utility of loans and advances, liability of business, borrowing of rate and lending rate, lending of money,.

Then there is about the loan , demand ;loan, term loan. Then cash credit, overdraft, discounting of bills, long term and short term loans then all about them. Nature and security of laons ,procedure of granting cash credit , overdraft and discounting bill.

Then is also the application form, submission of form, sanctioning of loan.security of loans .

All about the large borrowal accounts. There is all the schemes regarding the Home Loan. Docments to be submitted is also the part of this. All the do’s and dont’s are in this report.

There is the case of the home loan, questionnaire, findings, summary, recommendation ,conclusion etc.



BIBLIOGRAPHY

Indian bank Hand Book on Deposits, Structured Loan Products, and other services

Circulars relating with the criterions of the home loan. Indian bank Hand Book on Large Borrowal accounts. EZINE @rticles Small Business Criteria guide2home loan.com

APPENDICES

Home loan application form Appraisal form of home loan Credit report Details of assets and liabilities Pamphlet of home loan
